The company recently announced its annual report in 2019 that its revenue for that year was 7.957 billion, a decrease of 10.02%, and its net profit was 328 million, a decrease of 57.9%. The revenue in the first quarter of 2020 was 299 million yuan, a decrease of 72.49%, and the net profit returned to the mother was-171 million yuan.
In addition, the company recently released a pre-plan for the spin-off and listing of its subsidiary Hengrun Technology. The comments are as follows:
Under the tight financing environment, the company's revenue has declined somewhat, and the company's annual revenue in 2019 fell slightly by 7.957 billion yuan, a decrease of 10.02%, mainly due to the tightening financing environment, increased pressure on local financial payments, PPP project norms and other factors. Of this total, the revenue of the ecological construction business was 3.154 billion yuan, down 26.63%; the revenue of the water business was 3.767 billion yuan, up 19.58%; and the revenue of the cultural and tourism business was 1.035 billion yuan, down 25.71%. Under the background of the loose window of fiscal and monetary policy under the influence of the epidemic, the company's performance is expected to pick up in 2020. Revenue reached 299 million yuan in the first quarter of 2020, a decrease of 72.49%, mainly because the epidemic affected the progress of the company's proposed projects and projects under construction. The company's overall gross profit margin in 2019 was 23.66%, a slight decrease of 1.36 percentage points. Among them, the gross profit margin of ecological construction business was 22.55%, a slight increase of 1.48 percentage points over the previous year; the gross profit margin of water business was 18.46%, a decrease of 4.28% over the previous year; and the gross profit margin of culture and tourism business was 46%, an increase of 3.61 percentage points over the previous year.
During the period, the expense rate increased, and the impairment in 2019 significantly exceeded the company's expense rate of 14.82% in 2019 for the same period in 2018, an increase of 2.08 percentage points over 2018. Among them, the sales expense rate is 1.77%, the management expense rate is 6.14%, the two items are basically stable; the financial expense rate is 3.17%, an increase of 0.71 percentage points; and the R & D expense rate is 3.75%, an increase of 1.24 percentage points. In 2019, the company made a total impairment loss of 262 million yuan, an increase of 102 million. The company's net interest rate was 4.42%, a decrease of 4.62 percentage points. The net profit of returning to the mother in 2019 was 328 million yuan, a decrease of 57.92%. The net profit of returning to the mother in the first quarter of 2020 was-171 million yuan. In addition, in 2019, the subsidiary Lingnan Water Group achieved a profit of 103 million yuan, an increase of 29%, slightly exceeding the promised performance; Hengrun Group realized a profit of 68.54 million yuan, a decrease of 48%, and Demaji realized a profit of 41.9 million yuan, a decrease of 5.9%. The main business of the company's 21.86% stake is advertising information service and self-media. In 2019, the revenue was 465 million yuan and the net profit was 96.09 million yuan, with year-on-year changes of 15.85% and-10.68% respectively. With the arrival of the MCN (online celebrity incubation operation and marketing business) industry, micro-communication is expected to contribute more investment income to the company.
The operating cash flow has improved significantly. Hengrun Technology plans to spin off and list or enhance the company's competitive advantage in the culture and travel sector. the income-to-cash ratio of the company in 2019 is 0.60 in 2018, and the cash-to-cash ratio is 0.76 in 2018. 0.59. In the same period, operating activities generated a net cash inflow of 1.27 billion yuan, a significant increase over the same period last year, of which Q4 net cash inflow of 1.407 billion yuan, the main company to increase the intensity of remittance. The asset-liability ratio was 73.39%, an increase of 1.65 percentage points over the previous period. The company had a net operating cash outflow of 445 million in the first quarter of 2020, slightly lower than in 2018. The asset-liability ratio in the first quarter of 2020 was 71.95%, a slight increase of 1.18 percentage points over the same period last year. In May 2020, the company issued the preliminary Plan for the listing of its subsidiary Shanghai Hengrun Digital Technology Group Co., Ltd. to gem. Recently, the Central Shenzhen Reform Commission adopted the overall implementation Plan for gem Reform and pilot Registration system, which is expected to shorten the IPO cycle. If the subsidiary is spun off and listed smoothly, it is expected to strengthen the competitive advantage of the company's culture and travel sector in the future. At the same time, it also helps the market to form a clearer understanding of the company's culture and travel sector.
Investment suggestion
The company's performance shrank in 2019 as the financing environment tightened. With the current central policy path to boost domestic demand gradually clear, liquidity into the loose window period, the company's performance in 2020 may pick up. If the subsidiary Hengrun Technology is split and listed successfully, the company's culture and travel plate is expected to be further strengthened. Based on the impact of the epidemic in 2020 and the lower-than-expected growth rate in 2019, we downgrade the company's performance forecasts for 2020 and 2021. It is estimated that the company's EPS in 2020-2022 will be 0.33,0.40,0.47 yuan per share (the original 2020-2021 expected EPS is 0.35,0.45 yuan per share), and the corresponding PE is 14,11,9 times. Maintain a "buy" rating.
Risk hints: the impact of the epidemic on China's investment exceeded expectations, the company's project rebate fell short of expectations, the development of the culture and travel sector did not meet expectations, and the spin-off and listing of subsidiaries was blocked.